Global technology companies are set to spend unprecedented sums on artificial intelligence (AI) infrastructure, even as concerns mount over weak returns and uncertain business models, according to a latest Greed & Fear report by Jefferies.

The report, titled "The mother of all capex cycles", highlights that AI-related capital expenditure by major US tech players could reach about $700 billion this year and $800 billion next year, reflecting the scale of the ongoing investment surge.

"This number represents about 2% of US GDP and about 20% of US non-residential fixed investment," the report noted, adding that it is also "equivalent to nearly 30% of total non-financial pre-tax profits of all US companies." Despite the massive spending, Jefferies flagged rising pressure on cash flows of large technology firms, particularly hyperscalers such as Microsoft, Amazon, Alphabet and Meta.

"Capex as a percentage of operating cash flow has risen from 41% in 2023 to a projected 92% in 2026," the report said, underlining how AI investments are increasingly consuming company resources. The report warned that the sustainability of such high investments remains uncertain, especially given the lack of clear monetisation avenues in AI.

"Rising investment required to maintain leadership... will likely mean 'sustainable profitability is far away for pure model players'," it said, pointing to ongoing challenges in building viable AI business models. Jefferies added that AI may ultimately resemble a capital-heavy industry rather than a high-margin digital business. "AI will turn out to be much more like the capex-intensive airline industry than the winner-takes-all network effect of the Internet economy," the report observed

.The aggressive spending trend continues despite growing investor concerns, with major technology firms either maintaining or increasing their capital expenditure guidance. "Microsoft said... it expects to spend $190 billion in capex this calendar year," the report noted, while Alphabet and Meta have also raised their spending outlook.

At the same time, the report pointed to emerging cracks in the AI growth narrative, citing missed targets and rising competition among leading AI firms.A recent media report highlighted that OpenAI "missed an internal goal of reaching 1bn weekly active users" and has "missed multiple monthly revenue targets earlier this year," Jefferies said.

The report also noted shifting market dynamics, with competitors gaining ground in the rapidly evolving AI ecosystem."Gemini's web traffic share... has increased from 6% to 25.5%... while ChatGPT's market share has declined from 77.4% to 56.7%," it said, citing industry data.

Meanwhile, suppliers of critical components such as memory chips are emerging as key beneficiaries of the AI boom, given tight supply conditions. Jefferies cautioned that the biggest risk remains a potential reassessment of the current spending cycle." The risk... is a sudden realisation by hyperscalers, or investors, that they have over invested," the report said.

Overall, the report underscores that while demand for AI and computing power is expected to continue rising, the gap between investment and returns remains a key concern for the industry.

Published on May 1, 2026